LG.Philips LCD's profit declines

OVERSUPPLY With global spending on LCD plants growing 90 percent last year and prices for large-screen panels falling precipitously, the firm's margins have narrowed

BLOOMBERG

LG.Philips LCD Co, the world's second-largest maker of liquid crystal displays used in monitors and televisions, said fourth-quarter profit plunged on a decline in panel prices.

Net income fell to 35 billion won (US$33.9 million), compared with profit of 544 billion won a year earlier, the Seoul-based company said in a regulatory filing yesterday. Sales at the venture between South Korea's LG Electronics Inc and Royal Philips Electronics NV of the Netherlands fell to 1.9 trillion won from 2.1 trillion won, while operating profit was about 2 billion won compared with 552 billion won a year earlier, the company said.

Flat-panel prices slumped last year after LG.Philips and market leader Samsung Electronics Co made record investments on new plants, causing an oversupply in the US$36 billion market.

Earnings may rebound this year as lower prices prompt more consumers to replace bulky glass tube TVs with ones slim enough to be hung on walls, investors including Martin Lau said.

Panel Prices

Fourth-quarter profit was "bad because panel prices have fallen quite a lot," said Martin Lau, who helps manage the equivalent of US$5 billion for First State Investments in Hong Kong, before the release.

"Prices are close to the bottom and may rise in the first half this year," he said.

First-quarter LCD prices will fall by 5 percent to 9 percent from the fourth quarter last year and the company will increase shipments 9 percent in the current quarter compared with the three months ending Dec. 31, LG.Philips said.

Average prices of LCDs measuring more than 254mm diagonally fell to an average of US$195 each by December, down 29 percent from a year earlier, according to a report this month by Austin, Texas-based market researcher DisplaySearch.

The researcher said sales of LCDs measuring more than 254mm diagonally would rise 50 percent to US$36 billion last year.

Taiwan Companies

Taiwan's AU Optronics Corp (友達光電), the world's third-largest LCD maker, will probably post a fourth-quarter loss of NT$1 billion (US$31.4 million) after net income of NT$7.6 billion a year earlier, based on the median estimate of seven analysts surveyed.

Tainan, Taiwan-based Chi Mei Optoelectronics Corp (奇美電子), the fourth-largest producer, is expected to record a NT$806 million loss after a NT$4.8 billion profit in the same period a year earlier based on the median estimate.

AU Optronics on Oct. 27 said it may post a fourth-quarter loss and slashed last year's profit target 30 percent to NT$29 billion and its sales target by 13 percent to NT$162.4 billion, on falling prices.

Rebounding panel prices may draw investors in the first half, according to Lau.

Global spending on LCD plants and equipment surged 90 percent to a record US$12 billion last year, according to DisplaySearch.

LG.Philips's capital expenditure last year more than doubled to 3.9 trillion won from 1.4 trillion won in 2003, the company said.

While DisplaySearch projects spending to fall to US$7.9 billion this year, Suwon, South Korea-based Samsung Electronics said on Jan. 14 it plans to double spending on LCD plants to 2.9 trillion won this year. LG.Philips in June said it may boost capital expenditure by as much as a third to 4.8 trillion won this year, and Japan's Sharp Corp said earlier this month it plans to spend ?140 billion in the fiscal year ending March 2006, betting on LCD TV demand.